MBA643 Project Initiation, Planning and Execution Report Sample
Your Task
This assessment is made up of two parts:
• Part A students are asked to imagine they have been engaged by a Renewable Energy (utilities) company to develop a report on key aspects of project risk management and how they might be used in proposed future projects in order to manage and limit risk.
In Part A you are asked to write a report based on one of the below companies:
Infigenergy: https://www.infigenenergy.com/
Tilt Renewables: https://www.tiltrenewables.com/
The company you will analyse will depend on the LAST digit of your student number:
• 0 and 5 = Tilt Renewables
• 6 and 9 = Infigenergy
In Part B you are asked to conduct a capital budgeting analysis for the second company Tilt Renewables. Answer the short answer questions.
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Assessment Description
PART A (20 marks)
The report should begin with a short executive summary and conclude with several, short general recommendations. The content you include in the report should link the project management principles detailed below with the practices of the renewable energy company you have been allocated.
The topics on which students need to make recommendations in their report include:
i) Project selection – How should the company you select determine what projects to undertake and what ones to avoid? What tools, measures, and practices are available to project analysts in this industry?
ii) Cost management – What is the role of project cost management for your chosen company? Why is it important? What strategies or approaches should the company you have chosen adopt in order to effectively manage project costs?
iii) Financing – What financing measures or options are generally available to assist companies like the one you have chosen to fund proposed new projects? The report should include reference to any implications associated with different funding types or models.
iv) Implementation and winding up – Are there any particular issues associated with commencing a project that your company must consider? Why are they important? Who do they impact or affect?
What happens when the project finishes? How are projects wound up? Do they just end or are there resource or infrastructure considerations? Are there environmental issues associated with the end of a project?
Where possible, students should relate each section back to the renewable energy company they have been allocated. The executive summary should bring together general recommendations for the student’s chosen company relating to i)-iv).
Students should provide between 200-400 words per topic, together with approximately 200 words in total for the executive summary and final recommendations.
PART B (20 marks)
Consider the following three sources and answer the following questions directly. You do not need to write a lot for each question and for some you will need to use excel calculations. Submit you excel spreadsheet together with your report in the separate submission inbox on the assessment table.
Source 1: Tilt Renewables Snowtown North Solar Energy Farm
https://www.tiltrenewables.com/assets-and-projects/Snowtown-North-Solar-Energy-Farm/
Source 2: Tilt Renewables (TLT.NZ) Yahoo Finance
https://au.finance.yahoo.com/quote/TLT.NZ/
Source 3: Tilt Renewables Financials
https://au.finance.yahoo.com/quote/TLT.NZ/financials?p=TLT.NZ
You have been employed as a project manager by Tilt Renewables and asked to evaluate a solar farm project at Snowtown run by Tilt Energy (See Source 1).
You have been asked to evaluate whether Tilt Renewables should undertake the Snowtown North Solar Energy Farm based on the above sources. Assume this project has not yet been approved.
• Assume this is a twenty-five-year project.
• Consult source 1 for the estimated initial outlay/investment today (year 0)
• The investment will be depreciated on a straight-line basis over twenty-five years to 0 book value. It is estimated that the solar farm can be sold at the end of year 25 for $10 million.
• The solar farm will sell $15,000,000 worth of electricity each year into the grid from year 1-25
• Operating expenses for 25 years are $5.50 per solar panel per year (see number of solar panels from Source 1)
• The tax rate is 30%. All cash flows are annual and are received at the end of the year. The discount rate is 10%.
a) Based on the above information calculate the FCFs of the project. (10 marks)
b) Calculate the NPV for the solar farm. Should Tilt Renewables undertake this project? (5 marks)
c) Does the NPV take into account the CO2 emission reductions that the project will lead to (See Source 1)? Should it take this into account? Why or why not? (2 marks)
d) What is the debt to equity ratio in 2019 of Tilt Renewables according to source 3? How does this compare to other utility companies? What is the current share price according to Source 2 and when were shares first issued? (3 marks)
Solution
Part A
Executive Summary
The report is based on Infigen Energy which is an energy company that provides the electricity and energy to the customers. A number of projects run in the organization and it is necessary that the project areas are effectively managed. It is important that the different aspects associated with the project, such as project selection, costs, finances, implementation, etc. are handled properly. For University Assignment Help, These details are included in the report with specific recommendations based on the Infigen Energy case. The selection methods for the project shall include scoring model and Net Present Value (NPV) methods. Cost management and financing are essential aspects. Retained earnings, debt capital, and equity funding are some of the methods.
Introduction
The report is written for Infigen Energy which is an energy company. To manage the organization and the associated projects, there are various aspects that need to be managed properly. For instance, the selection of the correct project is important to achieve the intended business objectives. Similarly, costs and finance management are the key aspects that shall be in place so that the overall organization management is appropriately carried out. The implementation procedures and the winding up of the project activities shall also be done effectively so that the management and execution is in place. These aspects are included in the report for the selected organization (Iberdolaenergy 2020).
Project Selection
Infigen Energy shall make use of the benefits measurement methods to make decisions on the projects to select. Also, these shall be combined with the weighted scoring methods to correctly select the project.
The benefits measurement methods that can be used are Net present Value (NPV) and Internet Rate of Return (IRR) methods. These methods are based on the calculation of the returns that the company can expect based on the cash inflows and cash outflows. The methods will provide Infigen Energy with the details on the benefits that it may gain from the project options available. Also, the company has been actively working in the areas as renewable energy and sustainability(Bilqist, Dachyar, and Farizal 2018). These shall be included as the factors in the scoring model and must be assigned the higher weights along with the other aspects, such as returns, risks, etc. The selection can then be made based on the scores obtained.
The constrained optimization methods shall be avoided as these involve advanced mathematical operations and programming. The linear programming processes and dynamic programming are some of the aspects that can be avoided. This is because the organization is an Energy company and it may not have enough expertise to use these methods.
An example of weighted scoring method is included below.
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Based on the above calculations, project 3 shall be selected by Infigen Energy.
These tools are available to the project analysts in the industry. Also, advanced analytical tools, such as Big Data analytics tools are being used by the analysts nowadays to make predictions and selections accordingly. For example, the Big Data tools can be used to make forecasts on the possible risks or the impacts of the market scenarios on the project to make adequate selections(Hussain and Roy 2016).
Cost Management
Project cost management is extremely significant for Infigen Energy. This is because the organization can achieve its business aims and objectives only when the costs are utilized and distributed correctly. Project cost management can enable the organization to keep a track of the expenses and the benefits so that continuous improvements are made. Also, there are several budget risks that the organization is exposed to. The budget overrun can occur if the costs and not managed properly. Cost/Finance Manager shall therefore be deployed in Infigen Energy so that the effective cost management is in place(Blocher et al. 2019).
There are various approaches that can be used to manage the costs. The economic feasibility shall be conducted in the initial stages to make sure that the project can actually be completed in the allotted budget or not. The cost-benefit analysis shall then be conducted for the project to determine the benefits that the project can provide in terms of the returns. The earned value analysis technique shall be used thereafter so that project cost management is possible. It will make sure that the variance and gaps in the estimated and actual values of the project costs can be calculated. The technique will provide the Cost Manager and the overall project team to avoid the issues of budget overrun and the other cost-related risks in the project(Blocher et al. 2019).
Financing
There are different financing and funding measures that the company can choose from. Retained earnings is one of the methods that is usually adopted by the energy market. As per this method, the companies earn specific profit by selling the services to earn significant profit. For example, in this case energy is sold at a higher cost that it takes to produce the same. It is the most basic form of funding for the organization and the net income obtained after the expenses is referred as retained earnings. These funds can then be used by the organization to invest in the other projects and expand the business. These are also often used to reward the shareholders and it comes in the form of the dividend payments(Beecher 2021).
Debt Capital is another method which is used for financing and can also be used in this case. As per this method, the companies borrow money which can be in the form of bank loans or it may be done publicly through a debt issue. These are referred as corporate bonds and it enables a large number of investors to invest in the company and become the creditors or lenders. The creditors are provided with the payback based on the principal and the interest.
Another popular financing and funding technique that can be used by Infigen Energy is equity capital. The organization can raise the capital be selling the ownership stakes and these are sold in the form of shares to the investors. This is also referred as equity funding and is one of the extremely common ways of financing used by the power and energy companies(Kim and Ryan 2015). The investors in this case are not required to make interest payments and the capital can be raised. The primary consideration in this case is that future profits shall be classified among all the business shareholders. The funding technique is also considered as the most expensive form of capital for an organization.
Infigen Energy can make use of either of these methods for the purpose of funding.
Implementation and Winding up
There can be a number of issues that may arise with commencing the project. The first and the foremost are the environmental concerns. The involvement of the non-renewable energy sources along with the high energy consumption based on the implementation scheme can cause adverse implications on the environment. It is important to consider these risks as the impact can be negative on the environment and the associated customers. Climate change is one of the easily experienced examples of such issues. There can also be other issues that may arise during the project. For example, the schedule and budget issues may emerge. These are common as the projects undertaken by the companies like Infigen Energy are usually large-scale and long-term projects(Gottschamer& Zhang 2016). There are unwanted delays, market inflation, and other factors that become a part of the project and these lead to the emergence of the issues as overrun of costs and schedule. It is important to consider these issues as the impact can be negative with the overrun of the costs and schedule. The reputation of the organization can be at stake.
When the project ends, there are a number of processes that are involved in the closure stage and the post-deployment stage. Maintenance is one of the key aspects that continues after the finishing off of the project. There are residual risks that may remain and continuous improvements are made to enhance the overall quality and performance. There are infrastructure de-installations and transportation that is also a key activity involved. The environmental issues can arise if the tasks and activities around infrastructure management are not conducted in an effective manner. There may be improper waste management that may be associated with the project and it may cause adverse implications on the environment. Site cleaning procedures may not be followed and may result in significant issues.
Recommendations
• Organizations must include a number of different selection methods to be sure of correct project selection. These shall include financial and non-financial aspects during the selection
• Funding and financing sources for the project and the organization shall also be more than one. The reliance on only one source can lead to significant concerns.
• Environment risks must be treated on high priority as the occurrence of such risks can have extremely negative impacts
Conclusion
Infigen Energy can select from a number of selection methods, cost management techniques, and financing methods to make sure that it carries out the projects with best returns and benefits. The implementation mechanisms associated with the organization can also be complex and it is necessary that all the risks associated with the implementation process are managed in an effective manner.
Part B
Tilt renewables shall undertake the project based on the NPV calculated.
The project does not currently undertake the CO2 emissions while determining the NPV. However, it must include CO2 emissions as the significant aspect since 85,000 tonnes of CO2 will be released annually (Tiltrenewables 2020).
The debt-to-equity ratio for the organization from 2018 to 2021 is included in the table below.
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It is calculated with the formula as total liabilities/total shareholder equity. The formula for the same is total liabilities/ total shareholder equity. The ratio in 2020 and 2021 is good as it should be less than 1.
Contact Energy has the ratio as 0.78 while it is 0.242 for IFT based in NZ.
References
Beecher, J 2021, ‘Funding and Financing to Sustain Public Infrastructure: Why Choices Matter’, SSRN Electronic Journal. Available at SSRN: https://ssrn.com/abstract=3766953 or http://dx.doi.org/10.2139/ssrn.3766953
Bilqist, RA, Dachyar, M &Farizal, F 2018, ‘Project Valuation in the Geothermal Power Plant Project: A Comparison of Expected Net Present Value and Static Net Present Value Approaches’, SSRN Electronic Journal. Available at SSRN: https://ssrn.com/abstract=3248120
Blocher, EJ, Stout, DE, Juras, PE & Smith, SD 2019, Cost management : a strategic emphasis, Mcgraw-Hill, New York, N.Y.
Gottschamer, L & Zhang, Q 2016, ‘Interactions of factors impacting implementation and sustainability of renewable energy sourced electricity’, Renewable and Sustainable Energy Reviews, vol. 65, pp. 164–174.
Hussain, A & Roy, A 2016, ‘The emerging era of Big Data Analytics’, Big Data Analytics, vol. 1, no. 1.
Iberdolaenergy 2020, Home | Iberdrola Energy, iberdrolaaustralia.com, viewed 11 June 2021, <https://iberdrolaaustralia.com>.
Kim, J & Ryan, J 2015, ‘Infrastructure Funding Versus Financing: A Value for Funding Analytical Approach to Evaluation’, The Journal of Structured Finance, vol. 21, no. 3, pp. 69–87.
Tiltrenewables 2020, Snowtown North Solar Farm, Tilt Renewables.
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